Good news everyone! The leading minds in China’s bureaucracy have come up with an elegant solution to runaway real estate prices — stop all those foreign banks from lending money to all those foreign people buying homes in China.
The NDRC announced recently that it won’t approve medium- and long-term foreign debt quotas for overseas banks operating in China in 2012, if they intend to use such borrowings to fund mortgages taken out by foreigners.
Never mind that restrictions put in place over the last few years require any foreigner buying a home in most places in China to have worked here for at least one year and to put down at least a 50% deposit, the existential threat of foreigners buying up flats in Lanzhou demands direct and decisive intervention by China’s leading decision-making body.
Bloomberg spoke with James MacDonald, head of research at Savills in China who had this to say about the impact of this latest measure,
This is actually only going to have a perceivable impact on the mid-to-high end of the market. Foreign buyers only make up a tiny proportion of the overall China market and are not very active in the ultra high-end or mass market.
I would say that James’ assessment is generous, but perhaps he is just trying to be a nice guy.
However, if you are a foreigner in China and you were thinking of settling down here to enjoy the retirement and health benefits that the government recently required you and your employer to pay for each month, then you had better be prepared to pay 100 percent cash up front for your home.